Electricity Subsidy Rises From N1.6trn To N2.9trn

The federal government now needs no less than N2.9 trillion to subsidise electricity consumption in 2024.This is a sharp increase over the earlier projection of N1.6 trillion.

The minister of power, Adebayo Adelabu, who revealed this urged the federal government to either fund the subsidy or allow cost-effective tariff to prevail.

Recall that the Nigerian Electricity Regulatory Commission (NERC) had earlier said that tariff review will now be done monthly in view of the volatility of the exchange rate as well as inflationary pressures.

Adelabu, who addressed a press conference in Abuja on Wednesday, said only N450 billion was provided for electricity subsidy in the 2024 Budget but the ministry will need about N2.9 trillion for subsidy at the current exchange rate of the naira to dollar.

He also said the country is currently indebted to the tune of N1.3 trillion to generating companies (GenCos) as well as $1.3 billion legacy debts.

“What was made provision for in the budget for subsidy was N450 billion. And we require N2.9 trillion for subsidy. So can we afford it? Let’s be realistic. Can we afford it? N450 billion is less than 20 per cent of the almost N3 trillion that is required for subsidy if we must continue at this time.

“A national discourse on the nation’s perspective to electricity supply, commercial product or social service. There must be an agreement across divides on how we define electricity. Depending on the outcome of the above, either implementation of a cost reflective tariff or a cashed backed federal government guaranteed subsidy funding regime to inject liquidity into the sector,” the minister said.

Highlighting the road map for stabilising the sector in preparation for turnaround and transformation, Adelabu the federal government needs to settle the existing sectoral outstanding debt obligations to the Gas Supply and Power Generation companies using partly cash payment and guaranteed debt instruments which includes N1.3 trillion is current debts to the GenCos and $1.3 billion legacy debts to the GenCos.

Other roadmap includes increasing investments across the value chain for infrastructural improvements, capacity expansion and transmission automation; Diversification of power generation to absorb renewables and facilitate the nation’s journey to Energy Transition target; Encouraging distributed power strategy in conjunction with sub- national government focussing on embedded power model to reduce pressure on the National grid, and to ensure alternative electricity supply to DisCos as well as development of a rural electrification plan from a bottom up and a top down approach, to identify the unserved and the underserved rural and suburban communities among others.

The minister said state governments will now be allowed to generate power independently to supply power to their states.

On the grid that has collapsed for about six times between December 2023 and now, he said this was caused by shortage of gas, ageing machines in the grid value chain, low capacity to evacuate generated power, and destruction of power stations in some parts of the North-East geopolitical zone of the country.

He said the Transmission Company of Nigeria has over 100 abandoned projects due to variations on contract figures as a result of the fluctuations of the forex, hence the company will not award any new contracts till all such projects are completed.